Wyle

In late 1987, MaxPharma, Incorporated had an option to buy Hamilton Taft & Company’s stock from its then-owner, Connecticut General Corporation (“CIGNA”). MaxPharma was unable to arrange financing for the stock purchase using stock as collateral, but Howard Weil Financial Corporation offered to finance the stock purchase using a reverse repurchase (or “repo”) of a treasury bill (the “T-bill”), and the parties agreed to finance the stock purchase that way. Pursuant to that agreement, Hamilton Taft wired $5,000,000 to Howard Weil on January 28, 1988. The next day, Howard Weil used $4,900,000 of the $5,000,000 in Hamilton Taft’s account to purchase for Hamilton Taft a 90-day T-bill, having a face value of $5,000,000, which was immediately sold back to Howard Weil for $4,100,000 based on a reverse repo agreement under which Hamilton Taft would repurchase the T-bill in 90 days for the sale price plus interest. Finally, also on January 29,1988, Howard Weil wired $4,100,000 directly to MaxPharma, at the request of Hamilton Taft, so MaxPharma could purchase Hamilton Taft’s stock from CIGNA

After Hamilton Taft went into bankruptcy in 1991, Hamilton Taft’s trustee sought to avoid the 1988…